Just when traders thought that the biggest and most violent 3-day short squeeze in 7 years was about to end...

... a squeeze that has resulted in 3 consecutive 1%+ sessions for the S&P for the first time since October 2011, overnight we got one of the Fed's biggest faux-hakws, St. Louis Fed's Jim Bullard, who said that it would be "unwise" to continue hiking rates at this moment, and hinted that "if needed", the most natural option for the Fed going forward would be to do further Q.E.

At the time the algos ignored his comment, but once Europe opened, the local trading disks hit the buy button, pushing S&P futures from just above 1915 to 1931 where they were trading last.

It wasn't just Bullard: yesterday's Fed minutes were likewise as cautious, if not outright dour, about the future of the Fed's rate hike which was great news for markets as it means the rate hike cycle has been put on indefinite hiatus. "The Fed minutes show that it does look like they're gearing up for a slower rate hike path, which is good" for risk assets, said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors Ltd. "I think this rally has further to go, with the conditions set for the rebound to continue for a little while. Pessimism had got to extreme levels."

Actually, as we showed yesterday, what is really happening is one of the most violent unwinds of market neutral quant funds, who finds themselves forced to chase long higher as shorts continue to rip.

This could easily continue until the S&P rises back over 2000 only this time on forward earnings that are about 10% lower than the last time the market was in such perilous territory.

It wasn't all just a marketwide squeeze: food-related companies and miners weighed on Europe's equity benchmark while Treasuries advanced, while the yen also climbed. Elsewhere, Emerging markets rose to a six-week high, while the Mexican peso gained a second day after lawmakers took unprecedented steps to protect the currency. Crude extended gains with Iran backing an output freeze by key energy-producing nations.